Read the delivery promise and the exception together
Section 40 of the Sale of Goods Act, 1930 applies where the seller agrees to deliver goods at its own risk to a place other than where the goods are when sold. Unless otherwise agreed, the buyer still takes the risk of deterioration necessarily incident to transit. The exception is specific: a loss occurring during travel is not necessarily inherent in the journey.
Read the applicable text: India Code: Sale of Goods Act, 1930, sections 26, 39 and 40.
Establish what caused the deterioration
Use the agreed description, product characteristics, normal transport conditions and actual trip records. Separate deterioration that necessarily occurs under compliant transit from abnormal effects linked to delay, deficient packing, contamination or mishandling, where supported. No percentage in the section fixes an allowable tolerance. A routine planning allowance can be relevant evidence, but it is not the legal conclusion.
Consider express terms and the rest of the risk analysis
Read risk, delivery, packaging, temperature, quantity and quality terms together. The parties may agree otherwise under section 40. Under section 26, risk normally follows property unless the parties agree otherwise. If either party delays delivery by its fault, that party bears the risk of loss that might not otherwise have occurred. Section 39 separately addresses delivery to a carrier and the seller’s obligation, unless otherwise authorised, to make a reasonable carriage contract on the buyer’s behalf. Apply the specific contract and facts; transport records and insurance coverage do not themselves allocate all legal risk.
Keep physical and money flows separate
Compare dispatch and receipt measures on the same basis and attribute differences only with evidence. Record the contract value, supported quantity or quality change and credits or insurance separately. The illustrations are controls for evaluating an incident, not a rule for damages or an automatic right to withhold payment.
Six worked illustrations
All facts and amounts are fictional. Calculations illustrate the stated assumptions, not a predetermined legal outcome.
Illustrative example 1: Documented normal shrinkage
A seller agrees to deliver 1,000 kg at its own risk to a destination other than the place where the goods were when sold. Arrival weight is 980 kg after compliant transit, a 2% difference. An expert supports the 20 kg as necessarily incident on the facts; check whether the parties agreed a different allocation.
Illustrative example 2: Separate two causes
Of 500 kg loaded, 465 kg arrives in contract condition. Evidence attributes 10 kg to unavoidable deterioration and 25 kg to a distinct abnormal event. Do not treat all 35 kg as inherent.
Illustrative example 3: Express agreement changes the inquiry
A contract expressly allocates all supported transit deterioration to the seller. Arrival is 18 kg below 600 kg dispatched, or 3%. The express term must be considered even if the deterioration was inherent.
Illustrative example 4: Correct packaging tare first
Gross dispatch and arrival weights are 1,060 kg and 1,035 kg. Verified packaging weighs 60 kg and 55 kg respectively. Compare net weights of 1,000 kg and 980 kg, a 20 kg difference, not 25 kg.
Illustrative example 5: Separate an estimated value
A 40-unit affected lot is priced at ₹250 per unit. Evidence supports reviewing 15 units separately for abnormal damage. Their price allocation is ₹3,750, while the whole lot is ₹10,000. Neither amount fixes damages.
Illustrative example 6: Reconcile recoveries without duplication
The supported incident-cost measure for internal review is ₹30,000, with ₹8,000 salvage received and ₹12,000 insurance paid toward the same loss. Assume that the insurance figure is separate and does not already include the salvage. The remaining measured amount is ₹10,000 before determining liability.
Ten-step verification table
| Step | Action | Evidence |
|---|---|---|
| 1 | Read the delivery and risk clauses | Contract and amendments |
| 2 | Verify where goods were when sold | Sale and location records |
| 3 | Record dispatch quantities and condition | Weighment and inspection evidence |
| 4 | Record arrival using a comparable measure | Receipt, calibration and tare data |
| 5 | Identify normal transit requirements | Technical specifications and route |
| 6 | Investigate actual abnormal events | Temperature, delay and handling records |
| 7 | Assess whether deterioration was necessarily incident | Technical and legal analysis |
| 8 | Check whether the contract changes the default | Express allocation and tolerance provisions |
| 9 | Reconcile price, credits and recoveries separately | Incident calculation and supporting documents |
| 10 | Preserve conclusions and unresolved items | Evidence index and dispute record |
Sixteen practitioner FAQs
1. Does seller-risk delivery put every transit loss on the seller?
Section 40 makes an exception for inherent deterioration unless otherwise agreed.
2. Does every loss on a journey count as inherent?
No. Establish that the deterioration was necessarily incident to transit.
3. Does section 40 set a fixed tolerance?
No. Use the contract and evidence.
4. Can a contractual term change the default?
Yes. Review the parties’ actual agreement.
5. Does an acceptable internal tolerance prove legal allocation?
No. It is evidence to examine alongside the contract and cause.
6. Why compare net rather than gross weights?
Packaging changes can create an apparent difference unrelated to the goods.
7. Does poor packing count as inevitable deterioration?
Investigate the actual cause and distinguish abnormal conditions.
8. Can a delay introduce another risk question?
Review the contract and section 26 where fault-related delay matters.
9. Is delivery to a carrier the same as distant delivery at the seller’s risk?
The provisions address different questions; apply the facts and contract.
10. Does an insurer’s decision decide liability between buyer and seller?
It does not replace the contractual and statutory analysis.
11. How should mixed causes be handled?
Isolate supported quantities and document uncertainty where apportionment is not established.
12. Can quality deteriorate with no quantity change?
Yes. Compare actual condition with the agreed description and supported technical evidence.
13. Should the invoice be reduced by the whole measured loss?
Review actual rights and any agreed credits before changing the payable.
14. What if the goods were not sold at the dispatch location?
Establish where they were when sold and whether section 40’s conditions fit.
15. Does a recovery amount determine contractual damages?
No. Reconcile recoveries separately and assess the legal measure.
16. What should be retained if deterioration is disputed?
Keep contract, dispatch, arrival, technical and recovery evidence in one chronology.